Large businesses that pay out of pocket for their health care benefitsdo not have to comply with all the requirements of the new healthreform law but to be eligible for this exemption they must keep thehealth plan they had as of March 23.

Many employers, however, are choosing to change their plans ratherthan maintain their so-called grandfathered status. The reason, ofcourse, are rising health care costs.

These findings are in a report published last week by the NationalBusiness Group on Health. The Washington, D.C., employer coalitionreleased its report just as businesses are gearing up to offer healthplans to their employees. It also comes about a month ahead of theKaiser Family Foundation's annual report on health benefit costtrends.

Rising health care costs-about 8.9 percent for 2011 compared to anaverage of 7 percent for 2010-is nothing new. Those estimates reflectsimilar ones made earlier this year. After a few years of slightleveling, health care inflation is once again on the rise.

The new health care law of course is changing the way employers dobenefits. To comply with the law, about 70 percent of employerssurveyed will have to remove caps on the amount of health care anemployee is entitled to, 40 percent will have to lift annual caps and13 percent will have to remove clause denying or limiting coverage tochildren under 19 with pre-existing conditions. These are requirementsthat all plans must abide by.

But some changes are, strictly speaking, optional. Self-insuredemployers can maintain the plans they have. This was the pledgePresident Barack Obama made when he told Americans "you can keep theinsurance you have." But grandfathered status appears to be almostmeaningless. It essentially only allows employers to offer thebenefits they currently offer employees or make them more generous.

The government allows employers to make modest changes but the list of"cannots" is so and the list of benefits so short (grandfathered plansare not required to offer free preventive care) it makes little sensefor employers to choose grandfathered status. (For a fullerexplanation of the pros and cons of grandfathered plans click here.)

No surprise, then, that 53 percent of employers are choosing to change their plans and comply with the new law rather than maintain their current plan design. As more employers grasp the limitations of grandfathered status more will surely opt out of this over-hyped and under-delivered exemption.

One of the bigger changes affecting health plans, and one we've written about here and here, is how health care reform might motivate businesses to introduce health plans with higher deductibles. The survey said 61 percent of businesses will offer consumer-directed health plans, which have high deductible and health savings accounts. Twenty percent will make it the only plan they offer, up from 10 percent just last year.